PTON Stock Alert: Why Peloton Just Hit an All-Time Low

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Fitness equipment maker Peloton (NASDAQ:PTON) is in free fall today. Indeed, shares of PTON stock are losing more than 20% as of this writing after the company announced its latest quarterly earnings.

For the period, Peloton posted a wider-than-expected loss of 54 cents per share versus the consensus estimate for a loss of 53 cents. While revenue did beat (coming in at $743.6 million versus the consensus of $733.5 million), Peloton’s management also issued a very weak outlook. This has provided investors with little hope that the company’s turnaround efforts will be brisk, leading to today’s selloff.

For Peloton’s upcoming fiscal third quarter, the firm now expects revenue to come in between $700 million and $725 million. Wall Street analysts had previously penciled in $754 million in expected revenue for the quarter. Additionally, Peloton now expects its upcoming adjusted EBITDA loss to range between $20 million and $30 million, which is substantially higher than the $2 million loss analysts had projected.

This sort of deterioration in the company’s forecast certainly has investors adjusting their models today. Let’s dive more into the numbers and what to make of this rather dismal report.

PTON Stock Sinks on Weak Forward Guidance

For many companies in turnaround mode, backward-looking results don’t really mean as much as where the company thinks it’s headed in the coming quarters. For Peloton — a company that’s focused on slimming down its operations and focusing on core business segments — the hope was that increased efficiencies would result in a close-to-breakeven quarter in early 2024.

That doesn’t appear to be the case. Analysts seem to be concerned about the ability of Peloton to grow its user base and continue to generate more net income from its higher-margin businesses. While Peloton did note that it showed strength via various partnerships and that demand for its Tread+ treadmill was quite strong, various macroeconomic uncertainties are clearly playing a role in this diminished outlook.

Notably, the company did report a positive gross margin for its connected fitness products. However, revenue and earnings growth may take time to materialize, as the company continues to churn through inventory.

Perhaps management is trying to “kitchen sink” this quarter and get all the bad news out at once, to make an upcoming earnings beat more likely. That’s possible. But given the uncertainty Peloton’s management team has shown about where the company’s financials are headed near-term, many growth investors are looking for other options right now.

On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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